Archive through August 05, 2004

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mick

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Post Number: 1
Registered: 08-2004

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Votes: 3


Tuesday, August 03, 2004 - 12:43 pm:

About twelve months ago, after having lost a third of my trading capital,I stumbled upon Snifter's (very generous) post which outlined his long term trading strategy. One year later, & with a fifty per cent return on my portfolio over this time period, I am finally back in the black!!! Thanks Snifter, for making available such a user friendly & truly very effective trading system. I'm waiting on the sidelines for your update on your current system refinements. Keep up the good work.I'm sure I'm not the only one who's had his bacon saved by The Snifter System.}

danielc

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Post Number: 1
Registered: 09-2003

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Votes: 0


Tuesday, August 03, 2004 - 08:41 pm:

were do i find the snifter system mick,do you mean the one on incredible posts mick?,REGARDS dan

hilarius

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Post Number: 313
Registered: 04-2004

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Tuesday, August 03, 2004 - 08:59 pm:

Danielc

Here is my understanding of the Snifter System :-

(1) Trade in the same direction as the trend
(2) Take positions after retracements which respect the trend
(3) Use stops

Hoping I have not over-simplified

Hilarius

I come in peace to share my thoughts and to shine my candle light on possible long term opportunities

mick

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Post Number: 2
Registered: 08-2004

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Wednesday, August 04, 2004 - 02:18 am:

Hello danielc,

Yes, that post gives a concise rundown of the Snifter System, but there's more to it than that. At the time of that posting there was a lot of discussion about Snifter's process, which fleshed things out a lot more. Also, I've always followed Snifter's postings and have (hopefully) pieced together his general take on trading.

I really hope Snifter updates us with his latest system refinements because from my perspective any improvements would be a real bonus.

snifter

Member

Post Number: 614
Registered: 11-2002

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Votes: 24


Wednesday, August 04, 2004 - 10:10 am:

Hi Mick

Good to hear from you.
Well done on turning your trading results around....the 50% gain in your portfolio over the past year is a good result considering the gain of approximately 13% in the All Ordinaries Index over the same period.

I had plenty of help in developing my trading system... if it wasn't for Stan Weinstein and Alex Elder I'd probably be still floundering around in the trading wilderness. I don't trade their systems but I've borrowed some of their ideas and added a few of my own.
My core strategy is the same as always....buy dips during uptrends, short rallies during downtrends. I work entirely from weekly charts and I spend about an hour or so each week in analysing the market. I rarely look at the market during the week, and if I do its only to see how a trade is going....I don't do any analysis or make any decisions from daily charts.
I do no fundamental analysis except to let the weekly trend give me some idea of the soundness or otherwise of a company's fundamentals.
I can't remember the last time I looked at the financial pages or read a company report or a broker's newsletter.
I have no use for either trend lines or volume analysis. I don't look for the dozens of chart patterns that get so much coverage....I'm mainly interested in trends and retracements.
The refinements I've made in the last year or so have been to use a trend strength indicator to ensure that I'm trading not just trends, but STRONG trends. Also I now use the scanner in Market Analyst to streamline the selection process. For a long time the Market Analyst scanner was very second rate, but over the last year or so its undergone major surgery and is now very good and very simple to use.
I've also changed my moving averages, but this has been more for entertainment value than for practical purposes.
I use the CCI indicator on a setting of 3 to find pullbacks (or rallies during a downtrend). The CCI is purely to give the scanner something to search for...if I was eyeballing each chart I'd visually identify the pullbacks without using an indicator like CCI.
I trade only the blue chips....there are plenty to choose from, more than enough to supply you with plenty of trades even if you follow only the ASX Top 200.
Far from being the 'slow moving dinosaurs of the stock market', as is commonly believed, many blue chips have posted anywhere between 2 and 10 times the gain of the overall market in recent times. Some have done even better than that.
A trend following system like mine performs best in liquid stocks that tend to trend in a relatively stable manner. The good liquidity enhances the effectivness of stop losses. (stops tend to become less effective in thinly traded stocks.)

The template I put on my WEEKLY charts is...

* 11 period ADX with a horizontal line set at 25.
* 3 period CCI histogram with a horizontal line drawn at the zero level.
* 13 week and 26 week EMA's.

Here's what I do in my once a week analysis each Saturday morning...total time spent is about an hour to analyse the 600 US blue chips that I follow.

First, check the WEEKLY chart of the All Ords (or S+P 500 if you trade US stocks). If the 13 EMA is above the 26 EMA, both are rising and pulling further apart, and the tops and bottoms of the price action are getting progressively higher, then you know the overall market is bullish and you ABSOLUTELY MUST trade ONLY long positions.
The mirror image of these rules apply to identify a downtrend. If the overall market is downtrending, you ABSOLUTELY MUST trade ONLY short positions.
I cannot overstate the benefits of being in tune with the overall market...its VERY important.

SCANNING.
If the weekly trend of the All Ords is bullish...Scan for 'CCI crosses below zero' This scan finds stocks that are in the process of retracing to the downside.
OR
If the weekly trend of the All Ords is bearish....Scan for 'CCI crosses above zero' This scan finds stocks that are in the process of retracing to the upside.

With just a couple of mouse clicks the stocks picked by this scan can be put into a separate workbook. My weekly template is put on these stocks. Now I look at each stock one by one, but at this stage I'm only interested in the ADX, not the price action. As each chart comes up I'm looking at the bottom right corner of the screen to see if the ADX is above the horizontal line which is set at 25. It takes only a one second glance to check the ADX reading, and if its not strong enough, a further two seconds to put the next chart up on the screen. It sounds inconceivable that you can check out a new chart every three seconds, but remember that the process so far has been mainly to weed out the undesirables rather than to pick the winners.
If I come across a potential winner (one whose ADX is reading 25 or higher), I then check it's price action, Moving Averages etc, and if it shapes up OK in those areas I transfer it to a workbook which I've called 'Watchlist'....this takes just a couple of mouse clicks.
Out of my workbook of 600 US blue chips the scanner usually finds about 10% - 60 odd stocks, that are giving the CCI signal. At less than 5 seconds per chart it doesn't take long to whiz through this list and cull most of them, and save the best 8 or 10 to a watchlist.

The final selection on the top 8 or 10 is purely visual. If the overall market is bullish I'm looking for the stock to have....
* Higher tops and higher bottoms, 13 EMA above 26 EMA, daylight (space) between the two MA's, both MA's rising and pulling apart.
* ADX reading of 25 or higher.
* Stock must be in the process of a pullback.

ENTRY...
Put a buy stop or a buy limit order 1 tick above the candle that pulls CCI below zero. Lower the buy order each week if necessary to just above the top of the last candle. If/when the uptrend resumes, your entry order will be filled.
OR
For a more conservative entry, put the buy order 1 tick above the first bullish candle following the pullback.
All buy orders are placed on a GTC (good till cancelled) basis.

STOP LOSS...
Attach an 'If done' stop loss order to your buy order. If your buy order is done (filled), your stop loss will automatically be put in place.
I like to place the stop somewhere between 8% to 10% from entry, but I've used a 5% stop on occasion. 8 to 10% gives the market a bit of room to fluctuate without stopping you out.
For long positions its prudent to pay a small extra charge to use a GSO (guaranteed stop loss order), if your broker offers this facility. A GSO is designed to protect you against a severe price slump that could gap past your stop loss order.

TRAILING STOPS.
As the trend moves in our favour we need to progressively lock in profit. I do this by moving my stop up to just below each swing low on the weekly chart. Each swing low is of course preceded by a swing high. When each pullback ends, and the revitalised uptrend moves above the last swing high, then and only then will I move my stop loss up to 2% under the swing low.
I repeat this process each time a higher swing low is made, until finally the trend dies and my stop is hit, and I'm taken out of the trade.
There's one other part to my trailing stop strategy....if a weekly candle penetrates the 26 week EMA, at the start of the next week I'll move my stop up to 2% below the bottom of that candle. A penetration of the 26 EMA can sometimes be a warning that the trend is getting tired, in which case its prudent to take the precautionary action of moving your stop up to just under that candle.

MONEY MANAGEMENT.
2% of my trading capital is the maximum I'm willing to risk on a trade.

SUMMARY.
Use weekly charts exclusively.

Once a week check the weekly trend of the overall market, and trade only in that direction.

Find stocks that are trending in the same direction as the market as a whole, but are currently retracing.

Use the ADX to measure the trend strength of these stocks.

Buy these stocks as they finish their retracement and resume their trend.

ALWAYS place a stop loss order, and make it a guaranteed stop loss if you're trading long.

Use trailing stops to progressively lock in profits as the trend moves your way, and to take you out of the trade when the trend dies.

Use the 2% money management rule to prevent serious depletion of your trading capital from a losing trade.

If the overall market is bearish, use the mirror image of the system to go short in bearish stocks.

CONCLUSION.
By cutting losing trades quickly and letting winning trades run as long as the trend remains healthy, by trading only in strongly trending stocks, and by trading only in the direction of the overall market, this system virtually ensures an acceptable ratio of winning trades to losing trades, and that the average profit will be considerably larger than the average loss.
Its difficult NOT to make money with this type of system, PROVIDING its applied consistently.
The icing on the cake is that a large number of stocks (600 in my case) can be analysed in just an hour once a week.

Cheers,
Snifter

wadda

Member

Post Number: 291
Registered: 10-2002

Rating: N/A
Votes: 0


Wednesday, August 04, 2004 - 11:43 am:

Snifter,

Thanks again for your unconditional sharing of knowledge in a clear, concise and simple manner.

Cheers,

Wadda

"Buy low, sell high is a cliche, not a blueprint for action. It blinds investors to the professionals' approach of buying high and selling higher." Stan Weinstein

mick

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Post Number: 3
Registered: 08-2004

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Votes: 0


Wednesday, August 04, 2004 - 02:18 pm:

Hello Snifter,

To echo the sentiments of Wadda's previous post, once again thanks very much for your latest, very generous & really VALUABLE post. The value of this sort of information to new traders can't be underestimated, & as you aptly put it can can take you out of "the trading wilderness" with your shirt still on your back. In my case I know with certainty I would not be trading today if I hadn't adopted your principles in the nick of time.

Another point I would like to reinforce is, "It's difficult NOT to make money following this type of system PROVIDING it's applied consistently." In my limited experience, bending the rules, or trying to tweak the system has resulted in diminished returns. Although I'm delighted with a 50% return over the past 12 months, I know quite categorically, my returns would have been even better if I hadn't tried to beat the system by entering into trades where all the ducks were not totally in line.

As for your latest system refinements, I've had a quick glance at my charts from the past twelve months and can see the improvements these modifications would have made.

* The CCI does seem more sensitive than the previously used ROC indicator and,
* The use of the ADX indicator looks to be a real winner for picking the more lucrative trends.

Again, thanks Snifter for the update. I think your current posting is another Snifter classic, and deserves inclusion in the Incredible Postings hall of fame.

snifter

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Post Number: 615
Registered: 11-2002

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Votes: 0


Wednesday, August 04, 2004 - 02:18 pm:

Hey there Wadda

Welcome back home.....pleased those Hussein lovers didn't nail your hide to the wall when you were in Iraq!

That quote from Stan the Man is one of my favourites. When I found that quote in his book I must have read it 50 times until it burnt into my brain.
Look at that SIG chart...take note of how far it had risen by the time the buy signal showed up.
A lot of traders/investors would have said 'No, its risen too far, it can't go much higher - leave it alone'.
But it went a lot higher and its still going up.
Momentum breeds momentum...when we buy stocks that are in strong momentum moves there's every chance they'll go higher as more and more traders pile in when they see what's happening.

When's your next trip to the Garden City?....we'll have to get together again.

Cheers,
Snifter

"If you always do what you've always done you'll always get what you've always got.
Nowhere is this more true than in the markets".

snifter

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Post Number: 616
Registered: 11-2002

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Votes: 0


Wednesday, August 04, 2004 - 02:53 pm:

Mick

Thanks for your post....its always good to get feedback from people who are using my (or any other) system to achieve good results.

Next time I'm in Newcastle you can use some of your trading profits to buy me the best lunch in town!

Cheers,
Snifter

Julieann

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Post Number: 48
Registered: 04-2004

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Votes: 0


Wednesday, August 04, 2004 - 06:24 pm:

Snifter, that would have to be THE BEST post I've ever seen on here, and of course there have been many good ones. I trade a system very similar to yours and have the same success with it.

I have Neil Costa and Stan Weinstein to thank for the progress I've made. Over a two year period I experimented with short term trading but nothing compares to what I am doing now. When I started with it I had a few failures due to not following the rules - something I thought I would be able to do no worries. But now, having been at it for awhile I don't panic any more when things don't go the way I expected.

I haven't tried the CCI Scan but will do so in the coming days. Thanks for the great post.

snifter

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Post Number: 617
Registered: 11-2002

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Votes: 0


Wednesday, August 04, 2004 - 09:34 pm:

Hi Jules

If your software can do it, try combining CCI and ADX into the same scan.
Market Analyst can't scan for ADX at this stage, but they tell me its on their list of things to do.
Don't expect too much from the CCI scan - only a minority of the stocks giving a CCI signal have good looking chart patterns - there are some real 'roughies' among them that you'll turf out as soon as you see them.

Another possibility for identifying strong trends is when Hull's ROAR rises above 20%....I've noticed that this 20% reading frequently coincides more or less with the 'strong trend' signal of the ADX.

Cheers
Snifter

gundy

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Post Number: 34
Registered: 06-2003

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Votes: 0


Wednesday, August 04, 2004 - 10:56 pm:

Hi Snifter,

I am another trader that owes you a debt of gratitude, since adopting your system my trading has been turned around and for that I thank you.Wadda I'm sorry I didn't get to met you at Snifter's seminar, maybe at the next one. I always wanted to meet Rollercoaster Wadda(remember the post!)
Thank's again Snifter.

Kind Regards

Gundy

snifter

Member

Post Number: 618
Registered: 11-2002

Rating:
Votes: 4


Wednesday, August 04, 2004 - 11:10 pm:

Here's an example of a short trade using the SS (Snifter System)...its pretty much the same deal as an SS long trade, except that the rules are reversed.
Now we want the All Ords weekly chart to be bearish, and we want bearish stocks that are currently making a temporary rally.
We can find these stocks by scanning for 'CCI crosses above zero'.
Save the scan results to a separate workbook, then flick from chart to chart, checking out the ADX. When a stock with an ADX of 25 or higher is found, the price action is checked to see if the stock is downtrending, but making a temporary rally. The peaks and troughs should be getting progressively lower, the two MA's should be falling and pulling further apart, and there should be daylight (space) between the two MA's.
If everything shapes up OK, that stock is transferred to the 'Watchlist' workbook. The end result should be to have several good looking stocks in the watchlist, from which a final selection is made to choose the best of the best.
The SS works just as well on short trades as it does on longs

I hope you've all been honing your shorting skills, even if its only been paper trading. The Australian market has been bullish for the last 18 months or so, and bear markets follow bull markets as surely as night follows day. Bears don't hibernate forever.
I can't reliably predict markets or forecast the future, but I believe the probablilties favour the onset of a bear market in the US following the presidential elections in November.
If the US market does in fact turn bearish, its a pretty safe bet that world markets, including Australia, will follow suit.
Most of us are smiling in a bull market, but bear markets really sort the men from the boys and the women from the girls.
Play your cards right, and you won't have to be one of the majority who makes no money or worse still loses money during the bear market.
Hone your shorting skills now, even if its only paper trading, so that you're ready to plunder the market on the short side when the bears take control.

Cheers,
Snifter